Xstrata this morning sent a letter to Resource Pacific shareholders with a three-pronged attack on Resource Pacific's stance to reject its $2.85 per share offer.
It stated Resource Pacific had "repeatedly failed" to meet its own forecasts, that its production forecasts for Newpac in New South Wales were not achievable, and that Resource Pacific’s claims over Xstrata's existing mines' synergies with Newpac were "exaggerated".
Resource Pacific on Friday released its target’s statement, backed by an independent expert's report prepared by InterFinancial, which told shareholders to reject Xstrata's bid, labelling the offer "neither fair nor reasonable".
The target’s statement valued the company's shares at $3.56 to $4.09, with a preferred value of $3.82 per share.
However, Xstrata today said the target’s statement had a number of significant shortcomings.
“In particular Resource Pacific's 8Mtpa production plan does not stand up to scrutiny and accordingly it fails to provide a realistic appraisal of the company's value," Xstrata said.
Xstrata has continued to claim that an 8 million tonnes per annum target for Newpac is not realistic, today calling it "overly optimistic" and lacking "technical credibility".
It backed its claim saying the independent expert did not engage a separate independent technical expert with relevant underground coal mining experience to appraise the mine plan and production forecasts.
It also pointed out there was no Australian precedent for running two operating longwalls simultaneously in a single coal mine (part of Newpac's mine plan to reach 8Mtpa), that the average five-year ROM production rate for a mine with similar seam thickness to Newpac was 2.5Mtpa, and no other longwall mine in Australian produces 8Mtpa.
Xstrata also made jabs at Resource Pacific's track record of late, saying the company had "persistently missed its own targets and forecasts – most recently there has been no longwall coal production for about six months".
“Resource Pacific's track record alone casts significant doubt on the credibility of its own forecasts in the target’s statement," Xstrata said.
On Friday Resource Pacific managing director Paul Jury said Xstrata's bid had come at a time when Newpac had been experiencing short-term delays in transitioning between early longwall blocks.
Jury also said in the target’s statement that Xstrata should be required to pay for synergies it would be able to extract from Newpac.
“These include use of our coal handling and preparation plant, at a time when Xstrata needs further CHPP capacity, and improved access to coal covered by Xstrata leases that Xstrata could access from Newpac," Jury said.
Xstrata hit back today saying Resource Pacific had exaggerated the synergies.
“The underground mining synergies identified by Resource Pacific, which are associated with Xstrata's neighbouring coal leases, do not have value to Xstrata," it said.
Xstrata said it planned to mine the coal in its Cumnock lease by opencut methods. It added the coal in its Glendell lease was not suitable for underground mining with its complex geology and infrastructure constraints, and had already been approved to be mined by opencut methods.
It also said the benefits offered by Resource Pacific's coal handing and preparation capacity were limited and had already been factored into its offer price.
